Wednesday, June 04, 2014

The massive consolidation of wealth, combined with the removal of any limits on money in campaigns, has allowed for the purchase of our government.Today I am publishing a comprehensive and important guest essay, The Purchase of Our Republic, by longtime correspondent Y. Falkson.

Americans know that something is wrong, deeply wrong. They see signs of the problem everywhere: income inequality, growing concentration and power of mega corporations, political donations/corruption, the absence of jobs with decent salaries, the explosion of the US prison population, healthcare costs, student loan debt, homelessness, etc. etc. However, the true causes and benefactors behind these problems are purposely hidden from view. What Americans see is Kabuki Theater of a functioning form of capitalism and democracy, but beyond this veneer our country has devolved into the exact opposite.Those who benefit from this crony capitalist state go to extreme lengths to paper over the reality and convince Americans that the system works, the American Dream is still a reality and that American democracy is in fact democratic.Below I hope to begin to outline some of the underlying dynamics and trends that have evolved in recent decades and led us so far from what we once were. As fun as it would be, the answer is not some evil conspiracy by the Illuminati, but rather the unfortunate result of three long term and mutually reinforcing components that have been attacking the fundamental roots of the structure of our Republic.The first is the increased concentration of corporate and private wealth. Both of which are quickly yelled down in the media as anti-free market and class war hysteria.The second is the use of this wealth to capture all three branches of government in order to ensure the continued extraction of capital from the many and to the few.The rich might have climbed the ladder because they earned it, but they have then purchased government to pull up the ladder behind them.The consequence of the first two components is a democracy in name only that represents the very few.1. Faux Capitalism = Wealth Consolidation / Income Inequality

Corporate Wealth:While there is no true beginning to the story, we can start with the incredible build up and concentration of wealth among corporations in recent decades. The USA now boasts a cartel-like set of corporate titans in almost every industry. It goes beyond, but certainly includes, our Too Biggerer To Fail banks, merged from what was 37 banks in 1995 into a Frankenstein’s monster like 5 (Citigroup, JP Morgan-Chase, Bank of America, Wells Fargo and Goldman Sachs).In agriculture, Monsanto alone controls over 85% of all corn and soy bean crops, four companies control 83% of the beef market, 66% of the hog market and 58% of the chicken market. So while shopping at the grocery store might appear to be the manifestation of capitalism at its finest, it doesn’t take much digging to look behind the curtain to see how little competition truly exists.When the average American goes to pick up some groceries, they are shopping at Walmart and buying something from P&G that is mostly made of Monsanto corn. Is that true choice?
The same story plays out with our news and media (and other industries) where we have gone from 50 companies in 1983 to the big 6 which control over 90% of all media. Is choosing to watch one of 30 news channels, all of which are owned by News Corp (Rupert Murdoch) a real choice? This is not capitalism and they are not competing, not in the true sense of the word.Along with this consolidation of corporations in recent decades, their senior leaders have taken up a larger and larger piece of the pie at the expense of their employees. In particular, the ratio of CEO-to-worker pay has increased 1,000 percent since 1950. Unsurprisingly, Walmart is both the largest employer in the country and the worst CEO pay offender with a ratio of over 1000:1. This is at a time where worker productivity has increased significantly, something that historically correlated with increased pay. But no more. It’s a new twist on the old Soviet saying “we pretend to work and they pretend to pay us”, but now it’s closer to “we do all of the work and they pretend to pay us”.www.motherjones.com/politics/2010/01/bank-merger-historyillusion of choicewww.payscale.com/data-packages/ceo-income/fortune-100www.bloomberg.com/news/2013-04-30/ceo-pay-1-795-to-1-multiple-of-workersPrivate Wealth:
As a consequence of the royal tribute we pay to the C-suite class these days, we have likely surpassed the pre-Depression Roaring Twenties in terms of inequality.This, amazingly, has only accelerated since the crisis in 2008 in thanks to bailouts, Quantitative Easing and other gifts from Congress and the Fed. The wealthy 1% and in particular the .01% have now grown their fortunes to levels that tax comprehension and even their ability to spend it (the decisions by a few billionaires such as Bill Gates to essentially donate his fortune is a tacit acknowledgement that our current system over provides wealth to a select few).So what is an incredibly wealthy capitalist CEO of a mega-corporation do once they control their industry and have essentially limitless wealth? Well in a competitive market, the only way to go from the top is down and the only thing that can make that happen is competition. Consequently, competition must be avoided whenever possible.To squash or prevent competition, the oligopolies and oligarchs target their resources on the one place that can make competition illegal, our government.Something to keep in mind the next time you see a corporate billionaire grandstanding about the importance of “Free Markets” when their strategy is quite the opposite.As this capture of the government has taken place we have essentially shifted from capitalism and to crony capitalism. So we now have industries that have mastered the art of faking capitalism by turning our government into one that fakes democracy.This government takeover took time, but the purchase of all 3 branches of government has almost been completed by 2014. You don’t have to take my word for it, luckily that has now been empirically proven in an analysis of over 20 years of government policy where the clear conclusion was that policy makers respond solely to those in the top 90th percentile and essentially ignore the large majority of Americans.Testing Theories of American Politics: Elites, Interest Groups and Average Citizens

boingboing.net/2014/04/13/study-american-policywww.washingtonpost.com/blogs/monkey-cage/wp/2014/04/08/rich-people-ruleWealth Inequality in America (6:23 video) 2. Wealthy Purchase of Government Institutions / ElectionsPurchase of the Executive Branch:
Let’s take a step back and take a glimpse at how the government was purchased, beginning with the executive branch. In 1980, Reagan’s election cost less than $300 million. When Bush beat Kerry in 2004, it cost almost 3x times as much, almost $900 Million. 4 years later, the 2008 election cost a record $1.3 Billion. It was in this election where Obama hammered the final nail in the coffin for government funded for elections.Obama, more so than any other candidate in recent decades had the widespread support of millions of small donors, but in the end I guess it wasn’t enough. So when Obama “leaned to the green”, it forever set the precedent that you can’t win without the backing of our nation’s oligarchs. Consequently, the money has only gushed in since as the cost of Obama’s reelection in 2012 skyrocketed to an unfathomable $7 billion.Needless to say this is slightly above the rate of inflation. Our Presidents are now preselected exclusively by a tiny fraction of Americans can have the money to fund what has become necessary for a legitimate run.Summary: Candidates spend years courting the super-rich to build up a multi-billion dollar war chest. Only those who succeed can actually run a campaign that an average American will be aware of. Then Americans get to choose one of the pre-selected “candidates”. No wonder voter turnout is so low…Executive branch, check!– Note that media corporations benefit doubly as they can use their cash to fund elections, but are also the beneficiary of all that money as it is used for campaign spending.rt.com/usa/seven-billionPurchase of the Legislative Branch:
The process has progressed similarly in Congress. In 1978, outside groups spent $303,000 on congressional races. In 2012 that was up to $457,000,000. That is over 1,500 times the level in 1978. It would be funny, if it was so blatant and terrifying. By many accounts, our “leaders” in Congress spend 50% or more of their time working the phones or fundraisers rather than trying (and failing) to actually do the “people’s business”.Let’s also take a minute to appreciate the hypocrisy of anyone that pretends that the money doesn’t influence our government. Businesses do not give to politicians for charity. This is a payment for services that has proven exceedingly reliable and profitable. The ROI for money invested in purchasing Congressman is what CEO dreams are made of.No wonder the incentive is to invest in Congress rather than R&D or marketing. There are very few places in the world or times in history where you can find ROI’s in the thousands, or even the tens of thousands.In addition, increasingly those who work on Congress (and regulators) were previously employed by these large corporations or expect to work there later. A recent example is Chris Dodd who left the Senate the head lobbyist for Hollywood at the MPAA, the guys behind SOPA and PIPA, but there are many many others.Review: Congressmen beg for money to get elected, make sure to vote the way your benefactors would like, consequently get more money to get elected again. If at any point they do lose or quit, they take the big payday to work for those who have been paying them all along.Legislative Branch, Check!www.cnn.com/2013/07/11/politics/congress-election-costsJudicial Branch Endorsement of the Purchase of Government:
Last but not least, we have the enabling Judicial Branch. It only took a few purchased presidents to ensure the appointment of a majority of “free market” and “pro-business” judges. For instance, and disgracefully, Clarence Thomas was once legal counsel for Monsanto, but has not once recused himself from any cases involving Monsanto and always votes in their favor.These radicals have now fully endorsed and enabled the influx of money used to purchase the other branches. Specifically, 2 major decisions have completely opened the floodgates, Citizens United and McCutcheon. The first allowed unlimited contributions of corporate money into elections and brought us the notorious declaration that “corporations are people” and that “money is free speech”.This was more recently followed up with the private wealth equivalent in McCutcheon. In this ruling, Supreme Court Chief Justice John Roberts said as part of his majority opinion (presumably with a straight face) “… nor does the possibility that an individual who spends large sums may garner influence over or access to elected officials or political parties”.And with this, the Supreme Court has fully endorsed both major sources of immense wealth to purchase our elections and consequently our government.Review: The rich fund Presidential elections, Presidents nominate “business-friendly” judges and then the bought Congress approves their nominations. New judge then votes to ensure even more money is allowed to purchase elections.Judicial Branch, CHECK!3. A Faux Republic Dependent Upon the Funders and Not the VotersThe Founder’s Hope and the Sad Reality:
Acknowledging where we are as a country, it is often helpful to look to where we started for some perspective. Unsurprisingly, this type of problem was not overlooked back in the 18th century. In 1776, James Madison stated that his goal was to design a republic in which “powerful interest groups would be rendered incapable of subdoing the general will”. Madison hoped, perhaps naively, that factions would be thwarted by competing with other factions.Sadly, we are now in a time where factions (aka wealthy special interests) subdue the will of the people and ensure the government responds to them alone on those issues where they have a “special interest” and consequently asymmetric stakes in the game (Charles Hugh Smith). As a result, these groups essentially collude to allocate their resources to their own issues, but do not “thwart” or compete with other factions as they do the same. It’s a pretty great system, as long as you’re one of the wealthy few who can use their money to drown out the poor and voiceless many.And just like that, what was once a Republic has become a corrupt shell of its past self. All the signs are still there; votes, elections, campaigns, branches of government, etc., but behind the scenes the only ones represented are those who can afford to be heard.Summary: This massive consolidation of wealth, combined with the removal of any limits on money in campaigns, has allowed for the purchase of our government, or as Dick Durban once stated, “frankly they [the banks in this case] own the place”. If money = free speech, then those with all the money, have all the free speech.What Might Help?
Now that I have likely and thoroughly depressed the reader, let’s bounce around some ideas for what can be done. As stated in the beginning, this is not an unknown problem and many people are promoting a number of ways to fix or at least ameliorate the problem. I will briefly describe just a few which I think provide some direction any of us could easily implement or support.Change the Rules: Laurence Lessig of Harvard Law has put forward a visionary proposal for re-writing the way that campaigns are financed in his book, Republic, Lost: How Money Corrupts Congress--and a Plan to Stop It.Put simply, he would like to empower every voter with a stipend, say $150 per election to give to whatever candidate or candidates they prefer. If you would like to accept this money, you would need to forgo any other contributions or support (one would hope including the indirect PAC kind). This would actually provide even more money than is used in current elections, but would effectively democratize the funding process. While there would still be a “funding election” that takes place before the actual election, the funding would not be unequally provided.Lessig’s work has only begun, as this sort of bill or likely constitutional reform is nearly impossible to achieve, but he has undertaken and I assume will continue to implement many brave and creative ways of bringing about the change all American’s should support.Most recently he has suggested we begin to fund, ironically enough, a Super PAC to end all Super PACs. It would be funded with the solitary goal of changing how money impacts our elections.Please support them here: www.mayone.us/Change Our Day-to-Day: At the more micro level, Charles Hugh Smith believes that we will inevitably see our overly centralized and inefficient system erode away as it is replaced by more resilient, local and efficient businesses and societies outside of the current system. With that in mind, he recommends that “all anyone can do is the basic things--lower our energy footprint, stay healthy and avoid unnecessary medications and procedures, support local businesses, organic food growers, etc. In other words, what we can do is support local businesses that are part of the emerging economy rather than support corporate cartels.”Your Vote Does Matter: Do you live in Ohio, Florida or New Hampshire? Probably not. Despite what we are told every 4 years, there are actually states outside of the “swing states”, and even more surprising, the very large majority of Americans live in those states where your “vote doesn’t matter”. New Yorkers an Californians all know their state will turn Blue no matter who the candidates are and either don’t vote at all, or often vote for the Blue team in order to feel like they are on the winning side.The truth is that if you see the election as Red vs. Blue, you vote probably doesn’t matter. But here is the trick, if all the people who think their vote didn’t matter decided to vote for whom they might actually believe in, then their votes just might matter.
What if all the growing number of “Independents” (who usually still vote Blue), chose to vote for a third party? What if a third party candidate won a state like New York or California? What if that candidate was one whose primary promise to the voters was to champion a change to the role of money in government (perhaps in line with what Lessig proposes)? Would you vote for such a person?I would argue you should. If California alone (with 55 electoral votes) were to vote for a 3rd party that would likely prevent either Red or Blue candidate from winning the requisite 270 electoral votes.Think about the message that would send to both parties. I would predict that both sides would start to bend over backwards for an endorsement from that 3rd party and they would have to get it by taking up the same primary cause for reforming money in government. Consequently, at the root of our corrupted system which is perpetually ignored as both sides might suddenly become the big issue of the election. Then maybe we might begin to turn things around.Sources: Charles Hugh Smith (oftwominds, Surivival+, etc.), Yves Smith (Naked Capitalism, Econned), Laurence Lessig (Republic Lost, multiple TED Talks), Matt Taibbi (blog at Rolling Stone and now at The Intercept), Zero Hedge, John Robb, Max Keiser, Clay Shirky (Cognitive Surplus), Aldous Huxley (Brave New World, Brave New World Revisited), George Orwell (1984), Michael Lewis, Daniel Kahneman (Thinking Fast and Slow), James Richards (Currency Wars), Han Joon Chang (23 Things They Don’t Tell You About Capitalism) and Joseph Stiglitz (Mismeasuring Our Lives)

Thank you, Y. Falkson, for a comprehensive presentation on the capture of the political machinery by enormously concentrated financial wealth.Administrative note: due to family obligations, email replies will be near-zero for the next week or so. Thank you for your understanding.

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